Auto Insurance Companies Caught Overcharging Consumers

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MASSPIRG Praises Attorney General for Recovering Millions


BOSTON –  MASSPIRG praised Attorney General Martha Coakley’s action announced today to stop companies from systematically overcharging consumers. The Office of the Attorney General entered into settlements with four insurance companies resolving allegations that they overcharged consumers for motorcycle insurance by using incorrect motorcycle values to calculate premiums.  The settlements today will return $9 million to consumers, and stop the practice. These settlements are in addition to similar ones filed by the AG in January worth $11.1 million for a total of $20 million.

“Combined, these settlements total $20 million recovered and returned from the insurers to consumers. This action not only makes whole the consumers who were overcharged, it also protects all consumers as insurers are put on notice that the calculation of all premiums must be fair, transparent and accurate.” said Deirdre Cummings, Legislative Director of MASSPIRG.  “The Attorney General and her office deserve credit for uncovering and correcting this widespread industry mistake, which had deprived consumers of $20 million dollars.”

Auto insurance companies are required to calculate premiums by following the rules in their rating manuals.  The insurers’ rating manuals required the insurers to use current motorcycle book values to calculate the collision and comprehensive premiums charged to consumers.  However, rather than using current book values to calculate premiums, the settling insurers in many cases used motorcycle values that were inflated and out-of-date. 

Settling Insurance companies and amount anticipated to be returned to consumers:

Safety Insurance Company (“Safety”), $7.2 million

Plymouth Rock Assurance and Pilgrim Insurance Company, $3.6 million

Metropolitan Property & Casualty Insurance Company, $3.5 million

Liberty Mutual Insurance Company (“Liberty”), $3.1 million

United Services Automobile Association (“USAA”), $2.3 million

Quincy Mutual Fire Insurance Company (“Quincy”), $800,000

The settlements cover overcharges going back to 2002 and require the insurers to pay six percent interest to consumers on the overcharges.  Average refunds to consumers are anticipated to be approximately $300 with some consumers receiving thousands of dollars.  Tens of thousands of policies are believed to have been affected.

Most of the overcharged consumers will begin receiving refunds in the fall with the exception of Liberty Mutual customers who will begin receiving them in May. In order to be eligible for the settlement funds, a consumer’s motorcycle must have been overvalued by their insurance company and the consumer must have purchased either collision and/or comprehensive coverage. There are approximately 160,000 registered motorcycles in the Massachusetts.